Question

Presented below is information related to Splish Company. Cost Retail Beginning inventory $362,797 $286,000 Purchases 1,370,000 2,145,000 Markups 95,100 Markup cancellations 14,800 Markdowns 32,900 Markdown cancellations 5,100 Sales revenue 2,193,000 Compute the inventory by the conventional retail inventory method.

Answer 1

The conventional retail inventory method is used to calculate a company's inventory value. By calculating the cost to retail ratio and applying it to the retail value of goods available for sale, we can determine the inventory value. In this case, the inventory value is $838,525.

Step-by-step explanation:

The conventional retail inventory method is used to calculate the value of a company's inventory by taking the cost to retail ratio and applying it to the cost of goods available for sale. To compute the inventory using this method, we need to calculate the cost to retail ratio and multiply it by the retail value of the goods available for sale.

In this case, the cost to retail ratio is calculated by dividing the beginning inventory cost by the beginning retail value: $362,797 / $286,000 = 1.27.

Then, we multiply the cost to retail ratio by the retail value of purchases, markups, and markdown cancellations and subtract the markdowns and sales revenue to get the inventory value: (1.27 * $2,145,000) + (1.27 * $95,100) - (1.27 * $14,800) - $32,900 - $2,193,000 = $838,525.

Answer 2

$200,455

Step-by-step explanation:

For calculating the inventory by the conventional retail inventory method. we required to do the following computations which are shown below:

Using cost method

Goods available for sale:

= Beginning inventory + Purchases

= $362,797 + $1,370,000

= $1,732,797

Using retail method

Goods available for sale:

= Beginning inventory + Purchases + Net markups - Net markdowns

= $286,000 + $2,145,000 + $80,300 - $27,800

= $2,483,500

Now

Cost to retail ratio = $1,732,797 ÷ ($286,000 + $2,145,000 + $80,300)

= $1,732,797 ÷ $2,511,300

= 0.69

Now

Estimated ending inventory at retail

= Goods available for sale under Retail method - Sales revenue

= $2,483,500 - $2,193,000

= $290,500

So,

Estimated ending inventory at cost:

= Estimated ending inventory at retail × Cost to retail ratio

= $290,500 × 0.69

= $200,455